Cash notes counted at a bank office. Data from the Hanoi Stock Exchange and securities firms showed total bond issuance cooled down in September but risks still persist for buyers.(Photo vietnammoi.vn) Hanoi (VNS/VNA) - The corporate bond marketcooled in September and risks still persist for investors, according tosecurities companies.
Data from the Hanoi Stock Exchange (HNX) showed the totalvalue of corporate bonds sold in September was 16.25 trillion VNd (nearly 700million USD).
September’s value nosedived 80 percent from August's recordof 83.8 trillion VND and was still modest compared to the March-July period.
The decline came after Decree 81/2020/NĐ-CP took effect onSeptember 1 to restrict risky purchases of corporate bonds to make the bondmarket stronger and more sustainable.
A recent report by SSI Securities Incorporation (SSI) showedlocal companies in the third quarter issued 164.4 trillion VND worth ofcorporate bonds, up 29 percent from the prior quarter and 95 percentyear-on-year.
In the first nine months of the year, the total value ofcorporate bonds pumped into the market was estimated at 341 trillion VND, up 79percent year-on-year and the value of the bond market in comparison with totalGDP gained 3 percentage points to 14.4 percent at the end of September.
SSI also pointed out the total value of non-collateral bondsreached 43 trillion VND in the nine months, including 20.5 trillion VND worthof bonds issued by real estate companies.
About 29.1 trillion VND worth of corporate bonds wereguaranteed by the issuers or third-party companies. Of the figure, real estatecompanies’ bonds accounted for 78.7 percent.
More than 95 percent of all bonds with no collateral orlow creditability were sold in the nine months, proving market demand isat a high though investors have been warned of such assets, SSI said.
Those bonds may be too risky for investors as they may gohome empty-handed if issuers declare bankruptcy or liquidation, SSI said.
Some economists said most corporate bonds having been issuedare not guaranteed and of low creditability.
Many companies are making unreal assets, which are notreferred to their real financial and business performances, they said.
Those bonds are not due within a year so the situation isstill under control, they said.
But from the second year, if those companies are unable topay interest, the bonds could turn worthless and the consequences may be tooharsh for investors and the economy, they said.
Nguyen Thi Thanh Tu, a senior analyst at SSI Securities’research unit, said local companies may return to bank loans in the lastquarter of the year after the bond market is tightened by Decree 81.
Total lending increased by only 6.09 percent inJanuary-September from the beginning of the year, lower than the target of 8-10percent set by the State Bank of Vietnam (SBV) for 2020.
That means there is room for 150-320 trillion VND worth ofcapital to be pumped into the economy in the fourth quarter, Tu said.
“Most local companies have complied with Decree 81, makingthe bond market cool down in September. They would seek borrowings from banksso that risks could be hedged and investors are protected from potentiallosses,” she said.
“It is unlikely the corporate bond market would boom in thelast three months of the year. Companies will have to encounter stricter ruleson information disclosure and issuance standards,” Tu said.
But on the secondary corporate bond market, buying andselling would still be dynamic, she said, adding interest rates offered by bondissuers and third-party companies would still be higher than banks’ savingrates – which are now at 3-5.8 percent for terms of up to 13 months.
According to the Asian Development Bank (ADB), the Vietnamesecorporate bond market has made great achievements in recent years but is stillhighly risky for investors because no independent organisation takes charge ofrating local companies. The lack of such an organisation puts investors at riskwhen purchasing bonds./.
VNA
